3FOOD

Third Industrial Revolution Consulting Group
Beyond finance, other key growth areas for Luxembourg to diversify its economic exposure
include biotech, logistics and energy, and especially greater energy productivity. As many new
applications for blockchain technology emerge, the government can and should capitalize on
these early successes by inculcating a startup-friendly regulatory space, not only to encourage
innovation but also to drive the agenda in Brussels and Frankfurt, setting standards for the
future evolution of regulations. The BitLicense rules, for example, are a work in progress;
affording Luxembourg room to leverage its respected status as a trusted center for financial
management and break new ground. At the same time, local regulators should closely monitor
legal developments in competing jurisdictions such as the U.K., which is aggressively positioning
London as a fintech hub. Ideas for innovation-friendly regulation can be lifted from the U.K.
Financial Conduct Authority’s “fintech sandbox” concept in which it has designed a “light touch”
pro-innovation regulatory framework for start-ups. Additionally, some insights might be gained
from examining the Greater Zurich Area’s push to domicile as many blockchain companies as
possible.
In particular, there’s an important opportunity to explore “regtech” ideas emerging out of the
blockchain ecosystem. The transparency, traceability and immutability of blockchain ledgers
means that -- contrary to the earlier, less well-informed view that the anonymity of bitcoin
creates an escape route for criminals -- they can be a powerful tool for law enforcement.
Europol has recognized this by signing a MoU with blockchain analytics firm Chainalysis. When
Big Data analysis is applied to the blockchain, regulators are finding it produces a rich trove of
information. In the U.S., for example, Homeland Security is developing a blockchain analytics
prototype. Meanwhile, a Washington-based group called the Blockchain Alliance is engaging
leading digital currency firms in a collaborative working group with seven major agencies:
Homeland Security, the Department of Justice, the FBI, the IRS, the Secret Service, Immigration
and Customs Enforcement, the U.S. Marshals Service, and the Commodity Futures Trading
Commission.
The greatest potential may lie in breaking the paradigm of analog ID and delegated KyC/AML
regulation for money transmission, which has kept billions of people out of the global financial
system yet also failed to prevent an estimated $2 trillion in annual money laundering
worldwide. 260 Leadership for more flexible yet robust system can come from CSSF, which is
already using Big Data analysis to enhance its surveillance efforts. 261 When applied to the
260 United Nations Office on Drugs and Crime, “Money Laundering and Globalization,”
https://www.unodc.org/unodc/en/money-laundering/globalization.html
261 KPMG, “Management Company CEO Survey 2016,” Interview with Simone Delcourt, Director, Commission de
Surveillance du Secteur Financier. p. 7-8.
http://www.kpmg.com/LU/en/IssuesAndInsights/Articlespublications/Documents/Management-Company-CEO-
Survey-032016.pdf
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